Public Bank nets RM639m profit in Q3, trouble brewing?

From the Business Times:

Public Bank Bhd (1295), the country's third largest bank, reported a 3.7 per cent higher third-quarter net profit as it earned more from loans, despite a weak economy and even as it has set aside more money to cover potential bad debts.

Net profit for the three months to September 30 2009 came in at RM639 million, although revenue fell 12.7 per cent to RM2.4 billion.

The bank has put aside RM176.4 million of allowances for loan losses, 65 per cent more compared to the same time last year.

Managing director and chief executive officer Tan Sri Tay Ah Lek said Public Bank is on track to achieve a 14-15 per cent loans growth target this year, driven by demand for loans to small businesses, mortgages and car loans.

Despite a difficult economy this year, Public Bank's net profit has expanded consistently in the first nine months this year.

Net profit in the second quarter grew 3.6 per cent to RM611 million from RM589 million in the first quarter, and improved further by 4.6 per cent in the latest quarter.

Loans grew by 14.3 per cent on an annualised basis, while deposits expanded by 19.5 per cent. This compares with the industry's 6.8 per cent growth for loans and 6.3 per cent for deposits.

Public Bank is considered the best bank in Malaysia and is substantially increasing allowance for bad loans. I loathe to see what the other banks in Malaysia have to say. Loan growth profits seem to be what is holding up the bottom line. I imagine that the loan growth will taper off as demand for houses, cars, and mortgages wane from the initial rebound after the financial crisis.

If loan growth profits were to come down and bad loans were to increase, this would not bode well.

Malaysia's economy needs only a mild increase in western countries' consumption to put the country on much better footing, but if that's not helping, I don't know what will.